Tax Brief: Nova Scotia Budget 2011
April 7, 2011
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On April 5, 2011, the Nova Scotia Minister of Finance, the Honourable Graham Steele, presented the 2011-2012 Nova Scotia Budget. In this Budget, the Minister focused on the Province’s continued plan for change, which is to decrease the deficit and move towards a balanced budget. As a result, this year’s Budget does not include any major surprises. The Minister has forecasted a surplus for this past fiscal year of $447.2 million, which is up from the $222.1 million deficit originally predicted, and for a deficit of $389.6 million in 2011-2012. The Minister forecasts a balanced Budget by 2013-2014. The surplus for this past fiscal year was due to a combination of higher revenues and fiscal restraint. As a result, the provincial debt will be reduced by $37.8 million. Following is a review of the taxation measures and changes described in the Budget as well as a few other Budget highlights.
Two major initiatives are worthy of note in this year’s Budget. First, effective January 1, 2012, the corporate income tax rate for small business corporations will reduce from 4.5 per cent to 4 per cent. Eligible small business corporations can apply this tax rate on their first $400,000 of taxable income, after which the rate increases to 16 per cent. The reduction in the small business corporate tax rate, to take effect in 2012, provides small businesses with tax savings up to $2,000 annually that may be reinvested in the business.
Unfortunately, Nova Scotia continues to ignore the national trend to increase the small business corporation limit to $500,000. Nova Scotia and Manitoba (which has a small business tax rate of 0 per cent as of December 1, 2010) are the only Canadian jurisdictions that maintain the $400,000 cap on taxable income eligible for the small business corporate tax rate. Yukon Territory, one of the last holdouts, increased its threshold to match the federal small business level of $500,000, effective January 1, 2011.
Second, as previously promised, the Province will continue to reduce the large corporations tax on the capital of non-financial institutions, decreasing from 0.1 per cent to 0.05 per cent on July 1, 2011 as Nova Scotia continues to move toward elimination of the large corporations tax on July 1, 2012.
Finally, the cap on the Film Industry Tax Credit and the Digital Media Tax Credit will be removed, allowing producers to claim 50-65 per cent of eligible Nova Scotia labour.
This year’s Budget contains changes and enhancements to a variety of personal tax credits. The Basic Personal Amount will be increased by $250 from $8,231 to $8,481. Non-refundable tax credits, including amounts for spouses and common-law partners, dependents, etc., will be increased by the same proportion. Further, effective July 1, 2011, the Nova Scotia Affordable Living Tax Credit and the Poverty Reduction Tax Credit are to be indexed by 2.2 per cent, resulting in $1.6 million of taxpayer savings.
The Nova Scotia government chose to continue a program announced in last year’s Budget designed to eliminate provincial income taxes for seniors in Nova Scotia who receive a Guaranteed Income Supplement (“GIS”) from the federal government. GIS recipients will receive refund cheques from the Nova Scotia government in late 2011 for provincial income taxes paid on their GIS in the 2010 tax year.
The Budget builds on the Province’s plan to provide better care for Nova Scotia families by investing in the Better Care Sooner plan. The $3 million emergency protection fund will be used to keep emergency rooms open and support Collaborative Emergency Centres.
The Budget builds on the plan to improve health care for seniors, investing almost $25 million in new and replacement nursing home beds, expansion of the Caregiver Benefit Program and recruitment of additional nurse practitioners and other health-care providers. Budget 2011 contains $72 million to support major hospital and community health care projects across Nova Scotia.
The Province will invest more than $200 million to stimulate job creation and economic growth. The $200 million will go to the Productivity Investment Program, co-operative education, an innovation and competitiveness fund, loans approved under the Credit Union Loan Program and more.
The Budget also includes an investment of $42.5 million this year to fix the student assistance system, by providing additional student bursaries and grants, along with capping tuition increases at 3 per cent and creating a “debt cap” for students at $28,560, among other changes.
In addition, through investments made in the Budget, the Province will provide targeted support to help Nova Scotia seniors and others who live with low incomes. The investments include changes to the income assistance program and an additional $3 million in Pharmacare funding.
The Province introduced its first capital plan in December of 2010. The $560 million capital plan will go to build roads and bridges, schools, health-care facilities, housing and more. New projects will include information technology initiatives, an upgrade of the Province’s 9-1-1 system and the development of the new Northeast Nova Correctional Centre. The plan also includes $83.6 million for school construction and renovations.
It is worth noting that this past year there was an estimated surplus of $447.2 million, compared to a predicted deficit of $222.1 million. The difference is $669.3 million compared to the forecasted deficit in last year’s Budget. It can be broken down as follows:
• $211.4 million in additional revenue over the forecast
• $196.1 million in prior-year revenue adjustments
• $133.5 million reduction in department spending
• $80 million reduction in debt costs
• $48.3 million in miscellaneous savings
The Province is forecasting a deficit for next year due in part to the reinsertion of university funding in the amount of $327 million.
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